Chr. Hansen performance boosted by cultures and enzymes, expands in US natural colors

12 Apr 2018 --- Danish food ingredients producer, Chr. Hansen has reported solid organic revenue growth of 9 percent in the first half of 2017/18, bolstered mainly by Food Cultures & Enzymes (12 percent) and Health & Nutrition (8 percent.) According to the company, the development from Q1 continues into Q2 and they are satisfied with the progress in the first half year.

In a separate announcement, Chr. Hansen said it is increasing production capacity and adding new capabilities, to meet the rapidly increasing demand for natural colors in North America.

EBIT before special items increased slightly to €135.9 million, corresponding to an EBIT margin before special items of 26.2 percent. In Q2, organic growth was 9 percent, and EBIT before special items increased by 2 percent to €71.2 million. The overall outlook for 2017/18 is unchanged.

CEO of Chr. Hansen, Cees de Jong commented on the results: “The solid development from Q1 has continued into Q2, with strong organic growth in Food Cultures & Enzymes from all product categories and regions. Sales of bioprotective solutions also continue to show impressive organic growth rates at around 45 percent. Strong sales in animal health were driven by an improved sales coverage in EMEA and APAC.”

“Our EBIT margin before special items in Q2 improved significantly compared with Q1 and was on par with last year despite an adverse impact from currencies of more than one percent-point. Higher depreciations related to the recent capacity expansion were offset by improved production efficiencies in Food Cultures & Enzymes and a better product mix in Health & Nutrition.”

“We are satisfied with the progress in the first half of the year, and we maintain our overall guidance for the full year. Expectations to organic growth for Food Cultures & Enzymes and Health & Nutrition are unchanged. However, we lower our expectations to organic growth in Natural Colors for the full year to be below the long-term ambition of around 10 percent, due to the sales development in the first half of the year,” notes de Jong.

Speaking to FoodIngredientsFirst after the results were announced, Christoffer Lorenzen, EVP Food Cultures & Enzymes at Chr. Hansen said: “Essentially, we have expanded capacity in our Food Cultures and Enzymes business and our ability to produce ingredients better, faster and to higher quality levels. In short, we can produce more efficiently in the future.”

There are a few key trends that support growth in this sector and the fact we are catering to potential areas that are doing well, such as the dairy business. More importantly, our technologies are relevant in the food agendas of today. We have technologies that help keep foods fresh, reduce food waste and also technologies that cater to the needs of consumers, and where we can help our customers tweak their brand or products to meet end consumer demands. In addition to that, we have technology that helps us operate more efficiently and all of those are important for today's food industry,” he explains.

Lorenzen also notes that this commercial success on based three core pillars.
• Capabilities of production.
• Dedication to innovation and R&D within microorganism.
• Connection to our customers.

“We are very excited about microorganisms and the potential they have on the industry right now,” he says. “Good bacteria has great potential both in dairy but also in other food categories and certainly in innovation.”

Chr. Hansen recently launched ProKids, a drinking yogurt for kids with nu-trish GY-1, a new mild culture containing the probiotic strain LGG. Lorenzen also highlighted that fundamentally the company acquired the most documented probiotic strain (LGG), which now means that Chr. Hansen owns three of the top five probiotic strains regarding the documentation and he believes that good bacteria has the potential to improve human health and wellness.

“We want to enter into more partnerships in the food sector and to cater to dialogs related to health and wellness where the customer’s emphasis is on quality. Additionally as a company, we have a lot of the focus on health and wellness in our Health and Nutrition business unit where we are working on both within the dietary supplements and infant nutrition space and also in the human microbiome space, on how a good bacteria impacts human health.”

Speaking for the Food Cultures and Enzymes business, Lorenzen says he delighted with the strong partnerships that Chr. Hansen has with customers and the way in which they have been able to bring innovation that caters to customers and consumer need. “I would say that overall, we are in a comfortable place,” he adds.

Chr. Hansen expands natural color offerings in North America
Meanwhile, Chr. Hansen is increasing production capacity and adding new capabilities, to meet the rapidly increasing demand for natural colors in North America.Click to Enlarge

As the conversion wave from synthetic to natural colors continues to rise in the US market, Chr. Hansen is gearing up for the future with the purchase of the Banker Wire manufacturing facility in Mukwonago, Wisconsin, adding significantly to its presence in North America, in convenient proximity to its Milwaukee-base.

Taking this step is in response to an ever-growing interest from US consumers in products made from natural, recognizable and safe ingredients, putting pressure on food and beverage producers to convert to natural colors.

The acquired facility will be renovated to become the new North American headquarters for the company’s Natural Colors Division, housing everything from production to research and development, application and quality assurance labs, a pilot plant, a dedicated warehouse, as well as sales and marketing and other business support functions.

Lorenzen also comments on the expansion: “Natural colors is a business where we have a strong position and we believe that there is a continued strong potential for conversion to natural colors. Many European producers have already converted to natural colors from synthetics. That conversion is yet to come to in North America and so the plant expansion that we have just announced is a clear commitment to the US markets, and the colors business and our optimism when it comes to the future of that business.”

It is difficult to predict exactly when the US conversion will take off: “Regarding outlook and growth expectations there is more uncertainty of the exact timings of our US conversions but the main drivers that support Natural Colors are that consumers have a strong desire for clean label without chemicals, and that is very important,” he explains.

“This is the largest single investment for Natural Colors in recent years and demonstrates our commitment to the important North American market,” says Jacob Vishof Paulsen, acting Executive Vice President of Natural Colors Division. “Having the whole chain gathered in one place will allow for a fast and agile response to customer needs, supporting Chr. Hansen’s current and future business demands for the next decade – with room to grow.”

The expansion will strengthen Chr. Hansen’s position as an industry leader with full supply chain capabilities to deliver natural color solutions to current and future customers. The new state-of-the-art site will create better speed to market, based on more flexibility in production and supply chain and result in high-quality products, faster.